Republicans’ most recent fast-tracked government spending bill, informally known as “Reconciliation 3.0,” is facing an uphill battle in Congress. The Senate GOP likely will not pass the bill before August recess, with dissenting Republican voices claiming the $95 billion price tag is too expensive for taxpayers.
But the GOP is on a deadline. The midterm elections are roughly three months away, and this bill is the last real chance to create political momentum before elections that determine whether Republicans keep their congressional majority.
Fiscal hawks are demanding spending cuts before they support Reconciliation 3.0. Fortunately, Congress has a clear place to find them: Medicare and Medicare Advantage. Currently, hospitals are reimbursed significantly more than independent providers for identical care under Medicare, while flaws in Medicare Advantage’s payment system allow insurers to receive inflated reimbursements through upcoding. Fixing these incentives would generate more than enough savings over the next decade to offset Reconciliation 3.0’s estimated cost.
Republicans have considered these reforms before, and the best way to rework these broken incentives is to incorporate provisions of existing bills into the spending megabill as amendments: the Same Care, Lower Cost Act for Medicare and the No UPCODE Act for Medicare Advantage.
If the GOP’s leadership wants to save their bill and win over voters, they shouldn’t ignore the policy and political solutions right in front of them.
One major opportunity lies in traditional Medicare, where the federal government reimburses hospitals at far higher rates than independent providers for providing many of the same outpatient services. It’s a clear waste of taxpayer dollars, and lawmakers should equalize reimbursement rates across care settings through site-neutral payment reform — policies that pay the same amount for the same service, regardless of where it is provided. Estimates from the Committee for a Responsible Federal Budget put the savings from site-neutral payments at nearly $175 billion over the next decade, nearly double the price tag of Reconciliation 3.0.
Republicans wouldn’t be betraying their base by passing site-neutral payments, either. Recent polling shows a majority of American patients agree that the price of their care shouldn’t be higher just because it takes place in a hospital.
Medicare Advantage, the privately run version of Medicare, has a similar reimbursement issue. Here, the government contracts with insurers to administer plans to its patients, but the billing discrepancy lies in diagnosis coding, as the government reimburses insurers more for sicker patients. This incentive encourages “upcoding,” in which insurers submit diagnoses that increase reimbursement without sufficient supporting documentation or otherwise inflate patients’ risk scores, driving billions in excess federal spending.
Multiple insurers, such as Aetna and Kaiser Permanente, have settled with the government for similar amounts to avoid admitting they upcoded patient diagnoses. Still, the evidence is clear: multiple Inspector General reports point to insurer upcoding costing U.S. taxpayers millions each year. MedPAC, the nonpartisan commission that advises Congress on Medicare policy, estimates that Medicare Advantage will shell out $1.3 trillion in excess payments over the next decade absent reforms.
Republicans know that tackling healthcare fraud and waste is politically salient. Outside of health costs, independent voters want to hear candidates discuss the future of Medicare and reduce fraud in government healthcare programs, according to a new poll from KFF Health News. So far, Republicans in Congress haven’t capitalized on this sentiment, especially leading into a critical bill they must pass before the midterm elections.
REPUBLICANS CAN SAVE ELECTIONS AND DEFUND PLANNED PARENTHOOD. SO WHY AREN’T THEY?
Rather than risk leaving this part of their agenda to a lame-duck Congress, Republicans can act now and amend the existing reconciliation bill with portions of the Same Care, Lower Cost Act and the No UPCODE Act to control overpayments in Medicare and Medicare Advantage, respectively. Both bills take steps to rework Medicare’s reimbursement policies and better align payments with the care patients actually receive.
Supplementing Reconciliation 3.0 with healthcare reforms is not only fiscally responsible — it would protect patients and strengthen Medicare in the process. Republicans would be wise to consider their options.
Charles Sauer is president of the Market Institute.